Because if your house goes underwater, you keep living in it for years until it recovers and grows. With leverage on equity you get margin called during drops that kill your investment and give you no capture of future recoveries.
Of course if you were not US-only, but rather internationally diversified (and rebalanced), you would also have been fine. Diversification is important, even for Americans (cited sources in the description):
> For some reason, Americans are “told” to get 4x leveraged to the real estate market but to pay for their equities with 100% cash.
Your mortgage is fixed for 15-30 years (depending on mortgage product), and your real estate cannot be margin called (unlike securities which are constantly fluctuating in price).
Edit: Over leveraging on margin to buy equities? Not great. Borrowing against real estate equity to invest in equities, with rent comfortably covering the debt servicing? Potentially not as bad. TLDR Manage your risk exposure appropriately.
This reply cannot be understated. Those who are strong advocates for highly leveraged equity positions who use real estate to justify either have yet to experience a true market decline, or are simply really green to investing.
If I could leverage 4:1 on the total market index using a fixed 30 year loan without the ability to force a sale I would in a heartbeat. Unfortunately, that’s just not how it works.
And anything claiming to be the solution to that (like a leveraged ETF such as UPRO), suffers from volatility decay that causes it to underperform or eventually go to zero in horizontal markets (e.g. lost decades).
Yup. You cant get margin called on a mortgage, but theres clearly an optimal S&P leverage ratio, and its far above 1. Wild how repulsed americans are by this, when they really could retire much younger
I still don't get it. That comment just says they searched google images for axe pics. In Chinese, for some reason. They don't even address the letter Y mystery.
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> For example, Gryta and Mann report that GE would sometimes artificially boost quarterly profits by selling an asset (e.g., a diesel train) to a friendly bank, knowing that it could then buy back the asset at a time of GE’s choosing.
If you want to see another example, look into how airlines buy and lease aircrafts or how refrigeration systems of grocery stores are accounted for on accounting statements. Review accounting statements and quarterly/annual reports of large US public companies, you will find all sort of financial engineering. You will find a lot of such financial engineering cases discussed in any MBA Financial Reporting and Accounting classes.
I'd be interested in reading the book to get more detail on that. Sale and leasebacks (which often include buyback options) are a fairly common capital management measurement in the asset finance sector.[0] GE could have been committing fraud or this could be sensationalist reporting of a mundane financial management technique.
Great points. It depends on how confident you are in the claim that the primary purpose was “artificially boost quarterly profits.” No particular evidence presented in the excerpt.
Claiming the sales as a profit in the above situation is dubious. When I leaseback an asset I previously owned, I am taking a long term liability which is larger than the profit. This is totally fine in the case of something like an office building - a company probably won’t be around or be fit for the lifetime of the building - but dubious for core company assets.
For a car? A car will definitely not outlast most viable companies. What if it's cars for a car rental company? I believe the car would be a core company asset then. But if you don't label it as revenue, what DO you label it as? I'm not an accountant, only have rudimentary accounting knowledge, but don't see any options other than revenue there.
You got a better way to explain the transactions? If you're saying the transactions should be illegal, there are plenty of scenarios where these transactions wouldn't be weird or horrible. How to differentiate which are OK and which aren't?
Interesting point. There are obvious connections from
the Yamas to the eight-fold path of Buddhism: Right View, Right Resolve, Right Speech, Right Action, Right Livelihood, Right Effort, Right Mindfulness, and Right Concentration.
I’m not aware of an explicit ordering. But the other seven steps complement and deepen the meditation.
> As for upper bounds, de Bruijn showed back in 1950 that {\Lambda \leq 1/2}. The only progress since then has been the work of Ki, Kim and Lee in 2009, who improved this slightly to {\Lambda < 1/2}. The primary proposed aim of this Polymath project is to obtain further explicit improvements to the upper bound of {\Lambda}. Of course, if we could lower the upper bound all the way to zero, this would solve the Riemann hypothesis, but I do not view this as a realistic outcome of this project
To your point, there was some excitement and progress in the beginning, but it remains an unusual approach to mathematics.
It’s funny because that’s the opposite of what you’d want in a new hire: you want the engineer to pick a trivial solution rather than over-designing everything, so they can solve more problems for your company.
